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Los Angeles-Aside from the publicity damage caused by a potential conviction, Milberg Weiss Bershad & Schulman faces an indictment with significant monetary damages as part of the indictment that could unravel its business, say experts following the case. The firm, which has denied any wrongdoing, faces conspiracy charges that seek the return of up to $216.1 million, the amount of “tainted attorney fees” being sought by federal prosecutors, according to the indictment. That amount could be doubled under general fraud provisions if the prosecution gets a conviction, said Assistant U.S. Attorney Douglas Axel, one of the prosecutors in the Milberg case. “The $216.1 million is the pot we’re after, and there are various ways to get there,” Axel said. If they gain convictions, prosecutors could obtain the maximum amount from Milberg Weiss or one of two indicted partners, David Bershad and Steven Schulman. Both lawyers, who have taken leaves of absence from the firm, face joint and several liability as part of the conspiracy charges against them, he said. Such a financial hit could topple Milberg Weiss, said John C. Coffee Jr., a professor at Columbia Law School who specializes in white-collar crime and securities law. “I think $200 million, if they get a conviction, if for no other reason would destroy the law firm,” he said. “Most of the partners would rather flee than come up with $200 million.” Partners threatened On May 18, a federal grand jury returned an indictment against the New York firm, and Bershad and Schulman, on charges that they made $216.1 million in attorney fees by paying $11.3 million in secret and illegal kickbacks. Prosecutors in the U.S. Attorney’s Office for the Central District of California previously indicted Seymour Lazar, an alleged paid plaintiff for Milberg Weiss, and his lawyer, Paul Selzer. In the past few months, prosecutors obtained guilty pleas from another alleged paid plaintiff and a lawyer who admitted taking payments from Milberg Weiss. The case charges Milberg Weiss with one count of conspiracy, one count of money laundering and three counts of mail fraud. Prosecutors say the investigation is ongoing but have not commented on whether their targets include senior partner Melvyn Weiss and William Lerach, who left Milberg Weiss in 2004 to form his own firm, Lerach Coughlin Stoia Geller Rudman & Robbins. Tied to several of the charges are additional counts of criminal forfeiture seeking the return of hundreds of millions of dollars in “tainted attorney fees,” the indictment says. “One of the reasons why we’re so upset at the firm being prosecuted is because the forfeiture allegations themselves are a threat to the current partners at the firm,” said William Taylor III, a partner at Washington’s Zuckerman Spaeder who represents Milberg Weiss in the case. “Those people were not, for the most part, partners at the time and certainly not alleged to have known about or participated in the alleged wrongdoing.” Having $216 million in potential liability is damaging to Milberg Weiss, which is “not that big of a firm,” Coffee said. Unlike corporations, most law firms distribute income immediately to the individual partners, which leaves little on reserve. “It’s not like Skadden Arps,” Coffee said. “They don’t need to have $200 million in a bank account to meet their regular cash flow obligations.” Unlike the firm, Bershad and Schulman face additional charges of racketeering, for which prosecutors could, in the event of a conviction, obtain $26.6 million in attorney fees paid to Bershad and $9.5 million to Schulman, as well as their individual interest in the firm, the indictment says. During their tenure at Milberg Weiss, Bershad owned up to 18% of the firm’s profits and Schulman owned 15% of its profits, according to the indictment. Lazar also faces forfeiture demands from conspiracy and racketeering charges. The money laundering charges against Milberg Weiss, Bershad, Lazar and Selzer seek the return of at least $883,463, the indictment says. A spokeswoman for Schulman’s lawyer, Herbert Stern, did not return calls. In previous statements, Stern has said Schulman would plead not guilty. Andrew M. Lawler, a lawyer with Andrew M. Lawler P.C. in New York who represents Bershad, called the criminal forfeiture provisions “total overkill.” “These forfeiture demands are total overkill because they essentially are demanding forfeiture of 100% of a fee the firm worked on for years and years and obtained excellent results for the class,” he said.

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